We have lost all gains this year to date and then some.
However, the sell-off offers excellent point to make investments to smaller companies which otherwise would be rather illiquid.
I have no idea what-so-ever whether this is sensible timing or not (are we near bottom or not), but since I do not believe anyone can consitently time the market correctly, I try not to worry about it and concentrate on fundamental analysis (stock price vs. dividend vs. long term outlook).
I have shuffled a bit the positions in the bigger corporations, but the major part of the action lately has been to move money from ETFs to individual small cap stocks.
All ETFs except for few sector specific ETFs (e.g. health care) have been sold.
The net result is that the share of ETFs have gone first time below 10% of portfolio.
Also, since the small caps I am investing are almost exclusively from Finnish stock market, the share of European stocks in the portfolio has grown to 68%. The rest have been invested to U.S. stocks.
Our direct exposure to emerging markets is now 0%.
While these moves increase the risk in the portfolio we still hold quite many stocks that I consider low risk (so we are quite far still from all-out "risk-ON" position). Also, there is a two-fold reason why investing into individual stocks looks to be better trade right now than going broad market via an ETF:
- The individual stocks in Finland that we have in portfolio have much better dividend yield than any broad market ETF
- There is a taxation benefit in Finland to invest directly into stocks vs. via ETFs: dividend from a stock is taxed less than same dividend amount from an ETF. The difference isn't big, but long term even small differences matter.
Besides, we have hold on to some broad market ETFs that have gone almost nowhere last 5 years compared to rest of the market..
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